Google's high-profile LA deal raises concern

JohnLetzing

SAN FRANCISCO (MarketWatch) -- Google Inc.
GOOG, +0.98%
has been unable to provide more than a third of Los Angeles city employees with its Apps software because of security concerns, highlighting difficulties the search giant faces as it tries to create revenue streams outside of its core business.

On Wednesday, Los Angeles City Council member Dennis Zine filed a motion requesting a status report on Google's contract with the city. Google and Computer Sciences Corp.
CSC, -1.50%
its partner implementing Apps, have been unable to meet the security requirements of the city's police department, Zine wrote in the motion.

Zine's motion comes two months after Los Angeles Information Technology Agency General Manager Randi Levin raised the security issue in a letter to CSC manager Michael Schneider. The letter, which hasn't been made public, was seen by Dow Jones Newswires.

Los Angeles' growing complaints about the slow installation of the Apps product raise questions about whether the software suite is ready to replace standard applications, such as Microsoft Corp.'s
MSFT, +1.01%
Exchange email program, in businesses and government.

Mountain View, Calif.-based Google trumpeted L.A.'s decision to license Google Apps as an endorsement of its platform after it beat rival Microsoft for the contract two years ago.

Google Apps, which is delivered over the Internet, includes email, document and video-sharing technology.

Analysts say Google Apps is a solid product but may not yet meet the needs of many customers.

"When you're trying to do something new and disruptive, you're going to have to go through these teething things," said IDC analyst Al Hilwa.

Google has positioned Apps as a new revenue stream for the company, which generates the lion's share of its sales from Internet advertising.

Chief Business Officer Nikesh Arora said on the company's third-quarter earnings call on Oct. 13 that Apps was becoming a more important, even as it remains comparatively small. "More companies are fundamentally going Google," Arora said at the time. Google doesn't break out revenue generated by Apps.

For example, government employees in Washington, D.C., which struck a deal with Google in 2008, continue to use Microsoft Exchange for email but have access Google Apps collaboration and document software, according to Maurice Henderson, chief administrative officer at the District's Office of the Chief Technology Officer.

"It's one of many collaboration tools we use," Henderson said.

Google acknowledged the Los Angeles installation was behind schedule and said it was working to complete the project as quickly as possible.

"It's taken longer than expected to move LAPD to Google Apps because their law enforcement responsibilities entail unique requirements," a Google spokesman said in an email. "We're working closely with the city to meet their evolving requirements in a timely manner."

A CSC spokesman said Los Angeles identified new security requirements for law enforcement after the contract had been awarded, necessitating the additional time for completion.

In a statement, a city spokesman said, "Google email has been implemented and is working well for the majority of the City's workforce." He added that, "Discussions between the City and Google over specific requirements are ongoing."

Google has moved 17,000 of the city's roughly 30,000 employees to Google Apps, which includes messaging and document software.

The Internet giant is paying for many of the city's employees to continue using existing email and collaboration technology from Novell Inc., according to a document attached to Levin's letter.

That has aggravated Zine, the council member. He says he feels cheated by the arrangement with Google.

"I was sold a bill of goods along with everyone else," Zine said in an interview. "The bill of goods has not turned out to be what it was supposed to be."

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